With its relative political stability, growing economy and rich natural resources, Ghana has emerged as an increasingly attractive destination for foreign investment in recent years. However, like any emerging market, there are also risks and challenges that need to be considered. This article provides an overview of the investment opportunities in Ghana as well as the potential risks and challenges.
Ghana’s economic growth and business environment create opportunities
Over the past decade, Ghana has been one of Africa’s fastest growing economies, with an average GDP growth rate of about 6%. The services sector, which includes financial services, real estate and communications, accounts for about half of GDP. Industry, including mining, manufacturing and construction, accounts for a quarter. Ghana is the second largest gold producer in Africa and the government aims to increase output in the coming years. Ghana is also the world’s second largest cocoa producer. In recent years, oil and gas production has increased significantly. Ghana’s business environment rankings have improved considerably. The World Bank’s 2020 Doing Business report ranked Ghana 118th out of 190 countries globally. The government has prioritized reforms to reduce red tape and improve the investment climate. Ghana ranked 13th out of 47 countries in the World Bank’s Africa Regional Integration Index 2020, reflecting its position as a gateway to West Africa’s 360 million consumers.
Political stability enables long-term investment despite challenges
Ghana has held seven peaceful, democratic elections since 1992. While there are still governance and corruption issues, Ghana’s level of political stability stands out positively compared to many other countries in the region. Long-serving presidents in neighboring Ivory Coast and Togo add to uncertainty over succession plans.Ghana has largely avoided the coup trend affecting West Africa in recent years. The democratic process saw an opposition victory in 2000 and a transfer of power in 2008. After two terms under President Nana Akufo-Addo, Ghanaians will again go to the polls at the end of 2024. The two major parties dominate politically, but there is not a stark ideological divide between them.Major infrastructure development aligned with Ghana’s strategic goals should provide opportunities well into the future, regardless of election outcomes.
Incentives aim to attract investment but policy instability poses risks
Ghana has enacted laws and established agencies aimed at promoting and protecting foreign investment. The GIPC Act of 2013 increased incentives for investing in underdeveloped regions and strategic industries.The Ghana Free Zones Board overseas free trade zones with tax and customs duty exemptions. However, frequent policy changes have created uncertainty in some sectors. For example, a windfall tax introduced in 2015 led major mining companies to delay planned investments. Fiscal deficits driven by election spending and COVID-19 response saw Ghana’s debt rise above 80% of GDP, leading to a $3 billion IMF bailout in 2022.
Navigating local content and foreign exchange risks is key
The Ghana Investment Promotion Centre has minimum capital requirements for foreign investors. In many sectors, meeting local content requirements for employment and domestic sourcing is important. Understanding land ownership and acquisition regulations is also key.Foreign exchange risks need to be managed given the Ghanaian cedi’s weakness against the U.S. dollar. Tightening forex liquidity has made it difficult for foreign investors to obtain and repatriate investment proceeds. However, Ghana remains committed to free transferability of capital when currency is available.
While not without risks, Ghana’s relative stability, demographics and resource wealth make it an attractive long-term investment destination in Africa. With appropriate risk management and guidance from local experts, major opportunities await in multiple industries.